Morgenthau v. Sugar Land Ry. Co.

• Decision Date: 03 April 1936
• Docket Number: No. 7874.,7874.
• Parties: MORGENTHAU, Director General of Railroads, v. SUGAR LAND RY. CO.
• Court: U.S. Court of Appeals — Fifth Circuit

83 F.2d 72 (1936)

MORGENTHAU, Director General of Railroads, v. SUGAR LAND RY. CO.

No. 7874.

Circuit Court of Appeals, Fifth Circuit.

April 3, 1936.

R. C. Fulbright, of Washington, D. C., and Carl G. Stearns, of Houston, Tex., for appellant.

Tom M. Davis and J. H. Tallichet, both of Houston, Tex., for appellee.

Before SIBLEY, HUTCHESON, and WALKER, Circuit Judges.

SIBLEY, Circuit Judge.

A decree on final hearing dismissed a bill in equity which was filed June 1, 1927, by the Director General of Railroads against Sugar Land Railway Company to obtain an account of the moneys collected by the latter during the period of federal control of railroads from January 1, 1918, to March 1, 1920, in which moneys the railroads controlled by the Director General were interested because of joint rates on the freight handled. The bill admits that Sugar Land Railway Company had made monthly divisions, but alleges that the divisions had never been fixed by the State Railroad Commission or the Interstate Commerce Commission or agreed to by any authorized agent of the Director General, and were unreasonable and unjust, and that about $122,000 would be due to the Director General on a fair accounting. The bill was dismissed on two grounds, to wit: that the court had no power to determine just and reasonable divisions of joint rates; and, if otherwise, that the divisions made were in fact just and reasonable.

The Sugar Land Railroads are short lines in Texas connecting with three larger systems. Their main business was with a sugar refinery at the town of Sugar Land, to which imported raw sugar was delivered in large quantities with freight paid at destination, and from which refined products went into intrastate and interstate commerce with freight prepaid, so that the Sugar Land Railroads habitually collected about 90 per cent. of the freight moneys. Before January 1, 1918, there were in force voluntarily established through joint rates, and agreed divisions of them.^* The pleadings make an issue about it, but there cannot be any doubt that the Sugar Land Railroads were taken into federal control by the broad terms of the Presidential Proclamation of December 26, 1917, and that they remained in such control until June 25, 1918, when their control was relinquished by the Director General. The joint rates were collected and the agreed divisions of them were observed in the monthly settlements and remittances to the connecting railroads both before and after June 25, 1918, and until federal control ended, but with some protest of the divisions by agents of the Director General beginning in 1919. On February 13, 1918, the Interstate Commerce Commission of its own motion instituted an investigation into the divisions taken by the Sugar Land Railroads, but at the request of the Director General hearing was deferred and was not had until January 14, 1925. Meanwhile, after federal control had ceased and by negotiation among the interested carriers, a new basis of divisions less generous to the Sugar Land Railroads was established, effective September 1, 1920. The Interstate Commerce Commission made a decision on May 9, 1927, saying: "We have no jurisdiction to fix the divisions of joint intrastate rates. We have no jurisdiction to fix the divisions of joint interstate rates retroactively unless those rates were established pursuant to an order or finding by us, in which case we may require the adjustment of divisions from the date of filing the complaint, or date of the order of investigation, as the case may be. Section 15 (6) Interstate Commerce Act (49 U.S.C.A. § 15 (6); Pittsburgh & W. Va. Ry. Co. v. P. & L. E. R. R. Co., 61 I.C.C. 272. The record does not show that any one of the joint interstate rates to which the Sugar Land was a party and which were in effect during Federal control, or thereafter prior to August 26, 1920, was established pursuant to an order or finding made by us. * * * Upon the record before us we are without authority to enter an order fixing divisions between the Sugar Land and its connections prior to August 26, 1920." 126 I.C.C. 529. Divisions subsequent to that date were ordered to accord with those which by agreement had become effective September 1, 1920, and which were held to be just and reasonable. On June 1, 1927, the date of filing this bill, the Director General began before the Railroad Commission of Texas a proceeding to determine fair divisions of intrastate joint rates during the period of federal control. On January 2, 1931, a decision was made which followed the decision of the Interstate Commerce Commission in adopting the divisions which had become effective September 1, 1920, but a rehearing was granted on a ground touching jurisdiction and no final decision has yet been had.

The question of the right of the District Court to proceed without a decision by the respective commissions covering the period in question upon the divisions of the joint rates is not one of jurisdiction as a federal court, but one of the equitable merits of the case. Timken Roller Bearing Co. v. Pa. R. Co., 274 U.S. 181, 47 S.Ct. 550, 71 L.Ed. 989. The federal jurisdiction is clear both because the Director General is an officer of the United States authorized by law to sue, and because the suit arises under the laws touching federal control of railroads which are pleaded in the petition. 28 U.S.C.A. § 41 (1). One phase of the pleading alleged that the Interstate Commerce Commission had fixed the interstate divisions, but it is plain that it disclaimed jurisdiction to do so. This is therefore not a case to enforce an order of the commission under 28 U.S.C.A. § 41 (27) (28), and has not the limitations as to fact finding which attach to that jurisdiction. The jurisdiction invoked is that of a court of equity to enforce a fair account from one who has received money for another, or one who has engaged in a joint enterprise with another and collected more than his share of the profits. We see no reason why the principles of equity used in such a situation, or used at law in an action for money had and received, may not be applied to two common carriers, except so far as statutes may prevent. See Atlantic Coast Line R. Co. v. Balt. & Ohio Ry. Co. (D. C.) 12 F.Supp. 711; Atlantic Coast Line Ry. Co. v. Pa. R. Co. (D.C.) 12 F.Supp. 720. But we find no need to discuss the power of a court to fix divisions where none have been established and where the commissions having power to fix them either have not acted or cannot act, because we are of opinion that the divisions originally established prior to federal control persisted, and we turn to a discussion of that point.

The Presidential Proclamation of December 26, 1917, establishing federal control and appointing the Director General of Railroads to exercise it, prescribed that until and except as the Director General should otherwise by order provide "the officers and employees of the transportation systems shall continue the operation thereof in the usual and ordinary course of the business of common carriers in the names of their respective carriers." This of itself continued in force all established rates, for rates were indispensable in the business of the common carriers, and preserved the established divisions of joint rates at least for accounting purposes between the several railroads. The Director General by his...